The ledger of Giffin Corporation at December 31, 2014, after the books have been closed, contains the following stockholders’ equity accounts.
|
Preferred Stock (10,000 shares issued) |
$1,000,000 |
|
Common Stock (400,000 shares issued) |
2,000,000 |
|
Paid-in Capital in Excess of Par—Preferred Stock |
200,000 |
|
Paid-in Capital in Excess of Stated Value—Common Stock |
1,180,000 |
|
Common Stock Dividends Distributable |
200,000 |
|
Retained Earnings |
2,560,000 |
A review of the accounting records reveals the following.
- No errors have been made in recording 2014 transactions or in preparing the closing entry for net income.
- Preferred stock is 6%, $100 par value, noncumulative, and callable at $125. Since January 1, 2013, 10,000 shares have been outstanding; 20,000 shares are authorized.
- Common stock is no-par with a stated value of $5 per share; 600,000 shares are authorized.
- The January 1 balance in Retained Earnings was $2,450,000.
- On October 1, 100,000 shares of common stock were sold for cash at $8 per share.
- A cash dividend of $500,000 was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 2013.
- On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $9.
- Net income for the year was $970,000.
- On December 31, 2014, the directors authorized disclosure of a $100,000 restriction of retained earnings for plant expansion. (Use Note A.)
Instructions
(a)Reproduce the Retained Earnings account (T-account) for 2014.
(b)Prepare a retained earnings statement for 2014.
(c)Prepare a stockholders’ equity section at December 31, 2014.
(d)Compute the allocation of the cash dividend to preferred and common stock.